Auctions Grow More Popular In Maine
The
Keenebec Journal reports on the auction method of sellin a house. "Want to sell a piece a real estate for the most money you can? Or maybe you're a buyer who likes to sniff out good deals. Welcome to the world of real estate auctions. It is a popular trend in other parts of the country where high-end resorts, farms, and undeveloped land attract bidders on a big scale. But Maine's real estate buyers and sellers have, until recently, relied on traditional broker relationships. Real estate auctions were equated with bank foreclosures and distressed properties."
"'I am trying to educate people that auctions of real estate are good things,' said real estate auctioneer Thomas Madson who works in Gray."
"Auctions appeal to people frustrated with properties that have not sold, someone relocating who needs a new home fast, an heir who inherited a house but doesn't want the hassle of maintaining it or a developer who wants a buy-fix-and-sell."
"Adrian Harris has been doing residential, equipment, wood lot and stumpage, or standing timber auctions across Maine and New England for several years and says the real estate side of his business is booming. 'We are booked every weekend through April and last October and November, we had no free time,' he said."
"Real estate was one of the most active live-auction categories across the country, according to the National Auctioneers Association. Residential real estate auction sales in the country showed an increase of 8.4 percent over last year, up to $51.2 million. Land and agricultural real estate auction sales grew 7 percent and commercial real estate auction sales increased by 4.9 percent."
"The broker provides potential bidders with a prospectus that includes a copy of the deed, if the sale is a bank foreclosure, a property description, lead-based paint disclosure, tax information, utility bills, maps, and terms of the sale. Also included is required information from the Maine Real Estate Commission's consumer guide."
"Auctions require a cash deposit with the registration that will be credited towards the selling price for the top bidder at the time of closing. The deposits are returned to the non-winning bidders on the day of the sale, and closings are usually within 30 days of the auction. Financing has to be in place before the day of the auction."
"Buyers can check out the property at one or two open houses and on the day of the event that the auctioneer/broker staffs. Whatever is known about the land and the building has to be disclosed but a full title search and building inspection is the buyer's responsibility after the sale."
"The auction is usually held on-site with the reading of the terms and conditions of the sale and then the bidding begins at the publicized starting price. Only the auctioneer and seller know the 'reserve' bid, the minimum amount of money the seller will accept."
"Harris, a former dairy farmer from New Sharon with a down-home style, has built up his auction business over the years through word-of-mouth references and a reputation for honesty and results."
72 Year Low In US Savings
The
Associated Press reports on the American non-savings rate. "Americans spent more than they made last year, something they haven't done since the Great Depression. This time the trigger was good economic news, a booming housing market, which has made millions of American homeowners feel wealthier and thus more willing to spend with abandon."
"Government statistics released Monday showed they may have gone overboard with all of that spending, consuming all their after-tax income and then some. 'Americans seem to have the feeling that it is wimpish to save,' said David Wyss, chief economist at Standard & Poor's in New York. 'The idea is to put away money for old age and we are just not doing that.'"
"The weight of
credit card debt, compounded by holiday shopping, suddenly feels heavier. That's because the home-heating bills that arrived in our mailboxes this month are up, in some cases, 25% or more. This double whammy is hitting people such as Katie Villegas of Baltimore as they open their latest bills. Her January bill for gas and electric clocked in at $326, higher than last year, even though she's turned down her thermostat 5 degrees and has used one-quarter less natural gas because of the mild winter. (Her bill would have been 41% higher than last year if she'd used the same amount of energy.)"
"She also owes $2,500 on two maxed-out credit cards. Villegas and her husband are juggling a mortgage, car insurance and grocery bills, all on their part-time salaries. (Her husband is looking for a full-time job.) The $560 in government aid they recently received for their energy bill helped their situation, but the holiday gifts that siphoned off cash did not."
"'We're still pretty stressed out,' says Villegas, who has two children to support. 'There are balances due that we don't have now.'"
"Last-minute holiday spending on credit cards is also showing up on this month's statements. In the five weeks leading up to Christmas Day consumers were expected to charge $77.1 billion on credit cards, up 4.8% from the year before.
Easy Money Leads To Tennessee Defaults
The
Nashville Business Journal reports on foreclosures in Tennessee. "Almost 1 percent of Middle Tennessee homes were foreclosed last year, topping the national average. Industry watchers say the popularity of exotic mortgages is partially to blame."
"'There are a lot of loans that were made anywhere from one to five years ago that have adjustable rates,' says Jane Moore, president of the Tennessee Mortgage Bankers Association. 'Those rates are adjusting upwards and making it difficult for some people.' Moore says the other historical contributor to foreclosure hikes is loan fraud. 'If lenders discover fraud, they're going to foreclose,' she says. She says the most common are appraisal fraud or straw buyers, where an individual uses another person's identity and credit with their permission in order to purchase a home."
"John Reed, chairman and CEO of (a) mortgage banking firm, says the large amount of the adjustable-rate loans were made because money was so inexpensive. 'When money is easy to get, you're naturally going to have more fallout,' he says."
"Reed says that, although he's sure Nashville is behind both Knoxville and Memphis, the majority of foreclosures are happening in the larger metropolitan statistical areas and on houses whose prices are between $250,000 to $500,000."
"Lower-income owners also have been leaving beyond their financial means. A little more than half the population in the Nashville area making 80 percent or below the median income are cost-burdened by their housing expense. In other words, they're spending more than one-third of their income to pay for their house or apartment. In Memphis, the percentage of cost-burdened residents is 54 percent, not that different from Nashville; but Moore says the overall lower income in West Tennessee likely is tipping the statewide foreclosure scales."
"Reed, who also serves as chairman of the national Mortgage Bankers Association residential loan production committee, says that, although the foreclosure rates are no cause for panic, the industry has been in 'responsive mode' for the past 12 months as signs arose that foreclosure would be going up."
"He says both payments and prepayments began slowing down earlier this year. And Reed says another tell-tale sign of rising foreclosures is a dip in home sales, which Nashville hasn't experienced."
Vacant Homes For Sale A 'Trend' In N Colorado
The
Coloradoan reports on a growing trend in that state. "Nearly one-third of the houses listed for sale by Northern Colorado real estate agent Linda Norton are vacant. Many real estate agents in the region have noticed similar trends in their own residential listings in Northern Colorado. New loan options, tough first-time buyer situations, foreclosures, economic conditions, layoffs and the City of Fort Collins' promise to enforce the maximum of three unrelated adults per household are possible causes for increased rates of vacant homes for sale."
"The first wave of additional empty houses for sale came in on the heels of high-tech layoffs several years ago. Families relocated or had to downsize to smaller homes. Vacancies on the market are not always the result of foreclosure like they were years ago. With all of the financing options available today, it is easier than before to move to a new house before the old one has sold, said Norton. 'You can now get money to buy a new house first before you sell your own house,' said Norton."
"Some buyers who recently purchased their first home are having trouble. Their paychecks are not increasing as fast as their escalating, adjustable-rate mortgages. 'Adjustable-rate mortgages are good because they let buyers in who wouldn’t have been able to buy otherwise. They’re especially great for college students who only plan to live here for a few years,' said Norton. 'But those buyers really have to be prepared for the second or third year when their mortgages start increasing about two percent each year.'"
"'If people took out second mortgages, and they have the adjustable rate mortgage, they might have a tough time right now,' said Norton."
"The Larimer County treasurer’s office logged a record 939 foreclosures last year. Foreclosures increased 36 percent from 2001 to 2002, foreclosures increased 20 percent between 2004 and 2005. In comparison, local population increases have been in the 3 to 4 percent range annually. The residential market has seen 4 percent appreciation rates annually."
"Landlords increasingly are putting their rental houses on the market in Northern Colorado. Especially investors who bought into the market the past several years, said Eric Nichols, president of the Fort Collins Board of Realtors. 'But some landlords are getting tired of dealing with rental vacancy rates,' said Nichols. 'Now they’re trying to sell.'"
"Several vacant home 'staging' businesses have grown up to cater to the vacant home trend. Movers temporarily bring furniture and decorations into vacant houses on the market. 'It can be difficult for people to imagine how their furniture will fit in a house with a different layout,' said real estate agent Linda Hopkins, a real estate agent. 'A bare, cold house in the winter can be a bit discouraging.'"
Use The Web To Find Local Hotspots
The
Ledger shows that a random search for foreclosures can yield info on a local market, such as Lakeland, Florida. "Mortgage foreclosures filed with the civil division of the Circuit Court for Sept. 29Oct. 4, 2005."
For example, note the multiple lots in a subdivision by the same lender. "Lot 15, Block 292, Indian Lake Estates, Unit 9 (revised); by I.L.E. Properties Inc., a Florida corporation...Lot 2, Block 393, Indian Lake Estates, Unit 14; by I.L.E. Properties..Lot 7, Block 204, Indian Lake Estates, Unit 5; by I.L.E. Properties..Lot 4, Block 281, Indian Lake Estates, Unit 9 (revised); by I.L.E. Properties..Lot 3, Block 129, Indian Lake Estates, Unit 2; by I.L.E. Properties..Lot 91, Woodlands; by I.L.E. Properties."
"Lot 5, Arietta Hills; by JP Morgan Chase Bank, as Trustee.. Poinciana, Neighborhood 4, Village 7; by JP Morgan Chase Bank, as Trustee."
You might even find, as I did, that your bank has some defaults. "Lot 7, Block F, Lake Beulah Heights, Phase 3; by Everbank."
What Is The Better Foreclosure Info Source?
A reader asks, "How about a thread on the quality and meaning of the different foreclosure statistics. There are several companies offering stats and they seem to have different definitions. Anyone out there know what's what?"
California Defaults Up 25% In 2005
This
mortgage site had an update on California. "According to a foreclosure online site out of Irvine, California, there has been a 25 percent increase in foreclosure activity in the last year. The site's Foreclosure Market Report states the nearly 850,000 properties entered some state of foreclosure last year, up 25 percent from the previous year."
"And, related to the above news story, a 'flood' of mortgage defaults can be expected in the storm-ravaged Gulf Coast region now that 90-day grace periods extended by many lenders have expired."
Post Weekend Topics Suggestions Here!
Is there a specific question about foreclosures that you would like the readers of this blog to address? Plese post ideas here and they will be put up for discussion over the weekend.
Home Loan Scams 'Proliferate'
The
Contra Costa Times reports on the latest home loan scam. "As alternative mortgages proliferate, a real estate trade group is warning that a growing number of advertisements for such home or refinance loans are misleading consumers about their true costs. The Sacramento-based California Association of Mortgage Brokers issued the alert, its first concerning home loan ads, after it noticed a spike in flyers and faxes plugging the products as a means to pay off holiday debt."
"'They're being promoted by loan officers for their financial gain even when they're not in the best interest of the recipient,' said Cory Reid, president of the East Bay chapter of the CAMB."
"Many of the flyers trumpet rates between 1 percent and 2 percent, without noting the number goes up and refers to a payment rate rather than the actual interest rate. In other words, the borrower's debt would actually increase with every payment because it doesn't cover monthly interest on the loan, much less the principle. Other ads describe the 1 percent to 2 percent term as a 30-year fixed rate, which Reid said simply can't be true in today's interest environment."
"The flyers in question frequently target high-risk borrowers, those least able to afford loans whose payments swell over time and least likely to understand the complicated terms, with comes ons like 'no income verification,' 'bankruptcy- OK,' and 'bad credit= OK,' the CAMB said."
"The CAMB doesn't take issue with the products themselves, indeed many of its members arrange such loans. Instead, it's concerned that the ads and brokers distributing them don't properly educate consumers about the downsides and risks. 'It's very frustrating because I see too many people, buyers, getting sucked in by these ads,' despite being warned, said Scott Frazier, a mortgage broker in Livermore. 'They hear what they want to hear, and see what they want to see.'"
"In its press alert, the CAMB specifically cited two ads. The first proclaims, 'Christmas is over. Pay off that debt. Cash out to 125 percent,' and promises a 1.5 percent rate. The second flyer reads, 'Give yourself a fresh start in the New Year! Lower your payments up to 50 percent,' and promotes 'new rates as low as 1.75 percent.' The 1-800 number reached a Michigan call center."
"Many of the faxed ads, however, are of a different sort entirely. These businesses often aren't licensed by the department, or by any state agency, and the violations can prove challenging to address. 'Even trying to figure out who they are is very difficult,' William Moran said. 'Trying to chase down an 800 number, you can end up with a company based in Hong Kong.'"
Lawmakers Focus On Foreclosure 'Disaster': NC
This
Charlotte report show lawmakers are taking notice of the foreclosure disaster in North Carolina. "N.C. House leaders on Wednesday began forming a study committee to attack the growing problem of home foreclosures in Charlotte and across the state.Rep. Walter Church, who will chair the committee, says the effort was spurred by the Observer's series last week on the rising number of foreclosures in the Charlotte area."
"The problem of foreclosures is racing out of control, he says. In almost two decades as head of a savings and loan in Valdese, Church said he foreclosed on only five or six loans. The Observer reported that on average, 11 Mecklenburg County homes are now sold in foreclosure auctions every business day."
"After three missed payments, a home can be seized and sold to repay the lender. An explosion of new loan products over the past decade make it easier than ever to buy a home, and easier than ever to lose one."
"N.C. Commissioner of Banks Joseph Smith says he favors listing the name of the person who arranges a loan, generally a mortgage broker, on public real estate documents. That would allow investigators and the public to see which loan-sellers are connected with foreclosures. Smith said the skyrocketing number of foreclosures is 'a disaster.' The failure of so many loans could undermine public confidence in the mortgage lending industry, he warned."
"Philip Humphries, executive director of the N.C. Appraisal Board, says adding appraisers' names to public real estate documents also would be a good step if it helps reduce foreclosures. If an appraiser inflates the value of a home, borrowers can receive loans larger than the amount anyone else would pay for the house."
"Alfred Ripley with the N.C. Justice Center says his group wants better record-keeping on the causes of foreclosures, especially to see if some industry professionals are taking actions that contribute to the foreclosure problem. 'There are people in the marketplace who are misleading consumers,' he said."
"The Observer found Mecklenburg has the highest rate of foreclosures per capita in the state. Foreclosures in the county have more than quadrupled in the past six years. About two-thirds of those home-loan failures involve new types of loans designed for borrowers with lower incomes or problem credit. More than 80 percent involved homes valued at $150,000 or less."
"That combination of easy credit and inexpensive homes caused clusters of foreclosures on more than 70 Mecklenburg streets, where at least 15 percent of the homes foreclosed between 2003 and early 2005. That's at least five times higher than the failure rate on all loans in the U.S. The newspaper found the high foreclosure rates depressed surrounding property values, trapping neighbors in homes they couldn't sell, even if they paid their mortgages on time."
Homebuilders In 'Denial'
Danielle DiMartino at the
Dallas News has this on overbuilding. "New-home inventories have crested the 500,000 mark, an all-time record. On Friday, we'll get new-home sales figures for December. Purchase data for the month and homebuilders' reports on buyer traffic suggest sales dipped again. But that doesn't mean we'll see a dip in the inventory numbers."
"The one thing builders remain most enthusiastic about is the future. In the January National Association of Home Builders index, builders' expectations for sales six months out stayed at a lofty level."
"So what if rising interest rates are shutting out an increasing number of first-time buyers? Who cares if regulators are finally clamping down on the creative financing schemes that have allowed so many to buy? Home Depot is cutting the number of new stores it plans to open in half. What do they know? Is anyone actually paying attention to the fact that builders are missing their sales forecasts?"
"Nowhere does the denial run as deep as in the South, where starts rose by 5.2 percent in December. We in the land of the wide-open plains are our own worst enemy. We don't bother with planning and development or supply and demand; we just let the banks foreclose on our homes when we can't sell them. Indeed, foreclosures hit a fresh cyclical record with February postings."
"As for the starts data, just because they've dipped below 2 million doesn't mean they are at some kind of conservative level. It looks as if the overbuilding will go on."
"I'm sure there were similar alarm bells at the record number of homes built in 1972. With good reason; that year, starts outnumbered sales by a factor of 3-to-1. The comparison makes this year look downright healthy, 2005 starts 'only' outnumbered sales by 1.6-to-1."
"But back then, baby boomers were setting up households for the first time. Today, many are making plans to do just the opposite, get rid of that second home or go back to renting. Demographics are not on this market's side."
Free Look At Foreclosure Statistics
At the bottom of this
Originator Times article is an example of Realtytrac information, by state. "The RealtyTrac Monthly U.S. Foreclosure Market Report provides a graphical map that illustrates foreclosure percentiles by state, as well as the total number of homes in some stage of foreclosure nationwide and by state over the preceding month."
"Data is also available at the individual county level. RealtyTrac’s report includes properties in all three phases of foreclosure: Pre-foreclosures — Notice of Default (NOD) and Lis Pendens (LIS); Foreclosures, Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been repurchased by a bank)."
East Coast Housing Market Weakens
A
foreclosure tracking firm had this press release today. "A investment advisory firm and publisher of foreclosure property information firm, reported today that the seller's market of the last few years is coming to an end up and down the east coast. 'We're beginning to see price declines in most eastern markets in the 4th quarter of 2005,' said Alexis McGee."
"'The median home price in Boston fell 4.5% over the last three months. In Washington D.C. prices were flat over the last 30 days, but down 5.4% over the last 90 days. Realtors outside Manhattan in New York City report a shift to a buyer's market,' Ms. McGee said. She went on to say that while Miami, FL posted a smaller decline, the inventory there was up by 39.1% over the same time period."
"'Other Florida cities are showing similar price profiles, with the biggest inventory buildup on the state's west coast,' said Ms McGee. 'That buildup will lead to increased time on market and put more downward pressure on prices.'"
"She went on to say that she expected slowing housing markets to spark an increase in mortgage defaults in 2006. 'Our research has always shown a correlation between cooling markets and an increase in defaults,' said Ms. McGee. 'Homeowners in financial distress find it harder to sell their way out of foreclosure through normal channels, and there are too many high risk loans out there. Those chickens will begin coming home to roost later this year as payments on adjustable and interest only loans rise.'"
High Defaults In CO, Sheriff Sales In Delaware
Two local reports;
Colorado. "Colorado ranks second in the rate of properties entering foreclosure last year, according to a report released Monday. A total of 29,630 Colorado properties, 1.62 percent of the state's households, entered some stage of foreclosure last year. Florida reported 121,843 properties, 1.67 percent of the state's households, entering foreclosure."
"Part of the reason for Colorado's rate is a relatively low rise in home values, said Pete Lansing, president of Universal Lending Corp. The median price of a Denver single-family home rose 4.4 percent over the past year to $246,613. 'If you can't liquidate your property because you've either borrowed too much against it, or the value has gone down, foreclosure is your only alternative,' Lansing said."
From
Delaware. "When Kent County Sheriff James A. Higdon took office 11 years ago, the usual number of sheriff sales was five or six a month. 'And now it’s not unusual to have over 30,' he said."
"'Today, Americans live paycheck to paycheck,' said Dover real estate agent Rocke Gaston. 'Look at our credit card debt, it’s atrocious.' Today, he and Vincent White, president of the Delaware Association of Realtors, said mortgages are easier to obtain and there are various financing methods that make it easy for consumers to buy more than they can afford."
"'I foresee a day soon where these mortgages are given out and they’re going to regret it,' Mr. Gaston said."
"Buying a property in a sheriff’s sale requires homework and a strong stomach. 'When you buy a house in a sheriff sale, it’s a risk,' said Mr. Gaston, a frequent auction buyer. It’s recommended that potential buyers research the property for liens and to make sure taxes are current. They might also drive past a property or peek inside a window, but they won’t be able to go inside the house."
"The rest, the sheriff said, is at the buyer’s own risk. 'We can’t guarantee anything,' he said."
"At the auction, the sheriff’s office requires $2,000 in cash or certified check before bidding. The buyer has until the end of the day to give the county 20 percent of the remaining balance of the sale price. 'I don’t think we’ve had a case where they didn’t come up with the money,' the sheriff said."
"Most buyers, he said, are investors who have the cash to buy without financing the property, or have leverage with banks for loans. Sheriff Higdon said he and his deputies are forbidden to participate in the sheriff sales, professionally or privately. Nor have they, he said, bought a home through a private associate."
"Frequent buyers are real estate agents like Mr. Gaston, who said he fixes the properties and resells them. 'I know neighborhoods, I know values, I know what it takes to fix something up,' Mr. Gaston said. Besides investment, the venture is also a project with his sons."
"A year ago, Mr. Gaston said he’d found good bargains on houses. But lately, they’ve sold for close to retail prices. It’s a seller’s market,' he said. 'Were coming to the end of it.'"
'Confirming Indicators' Up
There is some
foreclosure news out this morning. "National real estate foreclosures increased in every quarter of 2005, according to an industry report released today. 'U.S. foreclosure numbers climbed steadily over the course of the year, with more new foreclosures reported in every quarter," said James J. Saccacio. 'This trend appears to be moving the real estate foreclosure market back to its historic levels.'"
"Despite a 29 percent decrease in new foreclosures from the first quarter to the fourth quarter, Florida documented the nation's highest foreclosure rate and accounted for more than 14 percent of the nation's new foreclosures in 2005. 1.5 percent of Utah households entered some stage of foreclosure in 2005, the nation's third-highest annual foreclosure rate. New foreclosures in Texas increased 54 percent from the first quarter to the fourth quarter."
"Other states with foreclosure rates ranking among the 10 highest nationwide were Georgia, Arizona, Indiana, New Jersey, Ohio and Tennessee. All of these state documented annual foreclosure rates of at least 1 percent of total households and reported new foreclosures increasing from the first quarter to the fourth quarter."
"California reported 61,563 properties entering some stage of foreclosure, and new foreclosures increased 16 percent from the first quarter to the fourth quarter. New York reported 37,068 properties entering some stage of foreclosure, and the state reported more than twice as many new foreclosures in the fourth quarter as in the first quarter."
And
Biz Money had this Q&A with Mr. Saccacio. "Q: What does the rise in foreclosures predict about New York City housing prices in the year to come? A: They don't predict, foreclosures aren't leading indicators, or lagging indicators, either. They're confirming indicators."
"Q: What's a confirming indicator? A: It validates the real estate appreciation or depreciation in an area. To the extent housing prices are going up, you'll see lower foreclosure rates, because people have the wherewithal to cure the default, through refinancing or the sale of their home."
Defaults Continue To Mount In Dallas/Ft Worth
The
Dallas News has a report on foreclosures in that area. "More people are losing their homes to foreclosure than at any time since the Texas real estate bust of the 1980s. As residential foreclosures jumped 30 percent from a year ago in North Texas, the average mortgage on foreclosed houses fell to $129,000, compared with almost $146,000 a year ago."
"The foreclosure hammer also recently fell on an Addison home valued at $1.5 million, a North Dallas house valued at nearly $870,000 and a Coppell property worth about $430,000. Connie Zetterlund, an agent who specializes in foreclosed property sales, says she's noticed increasing signs of trouble at lower-priced properties. 'The price ranges are a little lower than last year,' she said. 'There are a ton of foreclosures out there right now.'"
"That's not the only trend. Ms. Zetterlund has also noticed more trouble among newer mortgages, the ones acquired after the economic downturn earlier this decade. 'I'm seeing a lot of properties bought in 2004 and already going to foreclosure,' she said."
"Consumer Credit Counseling Service of Greater Dallas has seen an influx of people coming in with housing concerns. 'With the low interest rate, people are biting off more than they can chew,' said Gail Cunningham. 'They've been extended a loan that really eats up a significant part of their income.'"
"The last time home local foreclosures were so high was during the 'Oil Patch' recession of the late 1980s and early 1990s. The good news is that today's foreclosures make up a much smaller percentage of the overall housing market because the residential base in North Texas has more than doubled."
"Another difference: Back then, home defaults were often clustered in specific neighborhoods. These days, they're all over. George Roddy has tracked North Texas foreclosures for more than 20 years, said, 'I remember there were subdivisions in the late 1980s that had huge numbers of foreclosures. Today we are not seeing that, and it's so spread out that it doesn't focus on a subdivision or neighborhood,' he said."
"And while in the '80s most people owed more than what their houses were worth, the latest stats show that foreclosed homeowners have at least some equity. In the last foreclosure boom, lenders dumped houses and it wasn't uncommon to see property values fall by 30 or 40 percent in a neighborhood, Mr. Roddy said. Now, some real estate investors are looking at the Dallas-Fort Worth area as a place where bargains can be had for lender sales. So far, however, lenders are seeking top dollar for such homes, even if that means keeping them on the market longer, realtors say."
"'We certainly haven't seen the value loss like we had in the 1980s,' Mr. Roddy said. 'But if the foreclosure numbers hold up like we've seen for February, it could be pretty scary.'"
Speculators Bid Up Tax Deeds In Florida
The
Palatka Daily News has this report on one Florida countys' tax deed auctions. "It was standing room only at Tuesday’s tax deed auction. Deputy Clerk of Courts Kenny Downs estimated that about 75-85 people bid on tax deeds, some of which went for 10 times their listed price. 'They’ll be bidding right through the roof,' he said."
"Bidders came from all over the state, Downs said, adding that he even recognized one bidder who came all the way from Canada."
"Tax deed auctions haven’t always been so lively. Downs said interest has been picking up in the last 12-18 months. Before that, auctions drew only a handful of local people and deeds usually went to the first bidder who would pay what was asked."
"Tuesday’s auction is another example the fervor and intensity of Putnam County’s red-hot real estate market. Although land prices in Putnam have risen dramatically in recent years, they are still considered a bargain, compared to the rest of the state."
"Larry Pritchett, property appraiser for Putnam County, said his offices are overwhelmed by all the land changing hands, or all the hands coming in to buy up the property. 'Our deed processors are working overtime,' he said."
"Pritchett said thousands of vacant quarter-acre lots in the Interlachen and Georgetown areas that have sold slowly in the past are now demanding $10,000 at tax deed sales. The same property may have sold for $6,000 a year ago."
"As investors and vacationers look for new land to buy, Patrick Kennedy, director of planning and development for Putnam County, said many people are buying land they cannot yet build on, since the comprehensive land use plan may dictate uses other than those requested by landowners. 'I think that’s the issue that our office is going to face,' Kennedy said."
A 17 Year High In Ft. Worth Foreclosures
The
Star Telegram has this on defaults around Ft. Worth. "The number of homes slated for foreclosure continues to rise in Tarrant County, with 1,101 headed to auction next month. That is a 17-year high. That total is up 27.6 percent from a year ago. The total of 3,583 homes facing foreclosure in Tarrant, Dallas, Denton and Collin counties is the highest since 1989."
"Rising payments on adjustable-rate mortgages, high energy costs, job losses and higher required minimum credit-card payments are driving up foreclosures. 'Any one of them would be serious,' said George Roddy. He cited last year's changes to the federal bankruptcy law, which make filing for protection more difficult, as another possible factor. Before the change, he said, Texas homeowners often turned to bankruptcy protection to keep their homes out of foreclosure."
"The number of foreclosures started edging upward a few years ago after the layoffs in the telecom and airline industries. But foreclosures have continued to rise even as the economy has improved. 'We're moving from high levels to extremely high levels,' Roddy said. 'There's no other reason they would jump other than the reasons I mentioned, and those reasons aren't going to change.'"
"Analysts said rising interest rates, particularly on adjustable-rate mortgages, have forced some homeowners to give up their houses. A typical ARM can increase the interest rate on a loan by 2 percentage points at once, driving the payment up by hundreds of dollars. 'The amount that [the payment] goes up over time is generally more than somebody's salary would go up,' said Dara Boswell, of the Consumer Credit Counseling Services office in Fort Worth."
"Boswell also said that many new-home buyers are not getting their taxes escrowed, intentionally or not. Others are surprised when they get their tax bills in the year after the purchase, because their initial tax assessments included only the land, not the house, she said."
"The homes will be auctioned on the Tarrant County Courthouse steps Feb. 7. Other county courthouses are likely to be crowded that day, too. The total number of postings in the four-county area is up 32 percent."
"Dallas County had 1,732 postings, up 31 percent. Denton County had a 52 percent increase, and Collin County was up by a third. Still, the numbers have been higher. Dallas County regularly had 1,900 postings a month in 1989, Roddy said."
Second German Property Fund Freezes Assets
The
Financial Times has a report on the real estate meltdown in Germany. "Further evidence emerged on Tuesday of the spiralling crisis in Germany’s open-ended property funds sector, as a second fund in as many months froze the assets of investors to prevent insolvency. KanAm, a privately owned asset manager in Munich, froze its US-Grundinvest Fonds, just five weeks after Deutsche Bank became the first company in the sector’s 40-year history to take such a step."
"Germany’s open-ended funds have €88bn of assets under management, most of it private investor money. But concerns about overvaluations of German assets and poor performance have prompted a run of withdrawals from some domestically focused funds. Deutsche Bank’s Grundbesitz-Invest fund remains closed pending a revaluation of its assets and an attempt to sell €1bn worth of property."
"KanAm said on Tuesday that 'strong redemption demand' on the fund meant that today it would have breached its 5 per cent minimum liquidity threshold, further highlighting the shortcomings of the open-ended structure and the mismatch between short-term cash flows and bulky assets."
"The fund’s problems have been triggered by its association with Mills, a US real estate investment trust that it founded, still co-owns and with which it shares two directors. Mills, which invests mainly in US shopping malls, has twice had to restate its accounts and is being informally investigated by the Securities and Exchange Commission."
"The news came as AtisReal, a property intermediary owned by BNP Paribas, the French bank, published figures showing record transaction volumes in German real estate last year, partly the result of heavy sales by open-ended funds trying to liquidate their assets. Last year, the open-ended fund sector had rare outflows, of €375m in the 11 months to November, reversing a startling €39bn of inflows in the previous four years."
Competition Heavy For Foreclosures
Steve McLinden at
BankRate.com has this advice. "Experts foresee a wave of loan defaults as easy credit standards come back to haunt buyers. For astute investors, though, opportunities will abound. Many economic experts are predicting that mortgage delinquencies will rise up to 15% in 2006 among homeowners with higher-cost or 'subprime' loans."
"About 19% of all U.S. home loans are now subprime, in contrast to just 5% 10 years ago, according to the folks at Fitch Ratings. A lot of those homeowners with adjustable-rate subprime loans will see their loans reset at higher interest rates in the coming months."
"Foreclosure buying is a very competitive game right now, with so many real estate gurus advocating the strategy in books and seminars, and on TV and the Internet. Just do a Web search under 'foreclosure opportunities' and you'll see what I mean. Obviously, more and more buyers, particularly investors, are looking for an advantage in the game."
"Buying a 'pre-foreclosure' from a defaulting or financially strapped owner might be the best way to go on the consumer end. The county clerk's office keeps lists of such pre-foreclosures. Seek out titles where a 'lis pendens' notice has been filed by the lender."
"Before contacting and engaging in negotiations with the owners of these properties, make sure you are pre-qualified for a loan. You'll probably want to enlist a buyer's agent to make sure your best interests are represented and that you make the right offer, which would ideally be at a below-market price. Finding an agent with foreclosure experience would also be a plus."
"The foreclosure-property auctions that you see advertised are usually the realm of more heavily bankrolled professional investors who stand ready to pay cash for a property. If you are brave and well capitalized, you might try your hand at it. You might want to attend one or two for observation before acting. Whichever approach you try, don't give up if your first few efforts don't pan out."
From 'American Dream' To 'Terrible Nightmare'
The
Charlotte Observer reports on what North Carolina real estate participants are saying. "Builder Lewis Homes of Indian Trail. The company constructed 17 Hamilton Oaks houses. Nine foreclosed (53 percent). The houses were sold through real estate agents. Company president Tom Lewis says he believes lower credit standards are a major factor contributing to the rising number of foreclosures."
"Even so, he points out that the majority of homeowners in Hamilton Oaks haven't foreclosed. Those owners 'get into houses and enjoy the benefits of home ownership,' Lewis says."
"Barber Builders of Charlotte built 38 Hamilton Oaks homes. Five foreclosed (13 percent). They also were sold through real estate agents. Freeman Barber Jr., company president at the time, says he's surprised and concerned about the high foreclosure rate in Hamilton Oaks. 'Our intention is to give people the American dream. That's the basis of our business plan. This sounds like a terrible nightmare.'"
"He says buyers' loan information isn't disclosed to his company, which didn't make the loans. But he would like to see changes that would prevent so many foreclosures."
"Mortgage broker Sharon Borst says she arranged mortgage loans for a handful of Hamilton Oaks buyers, including Cassandra Boone. Borst says she discusses all aspects of loans with her customers, including first and second mortgages. Borrowers sign disclosure statements that outline all loans as well as financing, interest rates and closing fees, she says. That information also is in the purchase contract the buyer signs."
"'I'm thorough in my explanations to borrowers. I don't take it lightly,' she says. Borst agrees with experts who say most home buyers don't fully understand the process. 'But I know my clients are told, numerous times. Lenders follow fair credit practices,' Borst says, 'and borrowers are qualified at the best available pricing based on their credit history.'"
"Consumer protection lawyer Andrea Bebber of Charlotte, works with people facing foreclosure. She filed bankruptcy for four Hamilton Oaks homeowners. Bebber sees a pattern in starter-home subdivisions like Hamilton Oaks: First-time buyers sign up for big loans with little down payment. They strain to pay their mortgages. If they have adjustable loans, their payments rise. Then a financial setback hits. Lenders add late fees and other penalties. Houses foreclose. Property values drop."
"'Let me protect my clients from any mistaken impression that their foreclosures or bankruptcies indicate that they are at fault or that they are somehow irresponsible,' says Bebber. 'These hard-working families bought their homes believing that they would increase in value. Instead, the values have plummeted, not because of anything my clients did or did not do.'"
Foreclosures Drag Out For Years In Ohio
The
Plain Dealer reports on a foreclosure issue in Ohio. " A North Collinwood woman's complaint to the Ohio Supreme Court may prompt Cuyahoga County to quit hiding thousands of drawn-out foreclosure cases from the glare of critics.
Foreclosures vanish from judges' case lists while they are in the hands of magistrates and don't return until the magistrates send them to the judges for final rulings. The practice, said to have started during the Depression, conceals the protracted handling of cases, the numbers of which have surged in recent years."
"As of last week, almost 40 percent of Cuyahoga County's 12,755 backlogged foreclosures had dragged out beyond the Ohio Supreme Court's 12-month standard. But reports filed with the high court show only the cases at the judges' fingertips. A report for 2004, the most recent year available, counts only 12 Cuyahoga County cases more than 12 months old."
"Shelley Freed Smith of Lakefront Walk complained about the discrepancies in Cuyahoga County's reporting in a letter sent this month to Ohio Chief Justice Thomas Moyer. The empty house next to Smith's home has been in foreclosure for eight years. She wants all foreclosure cases, no matter how old, to show up on the dockets of elected judges. 'It's their job,' she said. 'There are so many homeowners in Cuyahoga County who are affected by this.'"
North Carolina Defaults Cut Area Resale Prices
A pair of
Charlotte Observer articles provide an update on defaults in North Carolina. "Don't make the mistake of thinking Mecklenburg's high foreclosure rate affects only people losing their homes. The problem is much wider. The situation, detailed in a series starting on today's front page, is this. Mecklenburg County led North Carolina in home foreclosure filings in 2004, at 8.6 per 1,000 people. The state average was 5.0."
"Why so high here? The problem is likely caused by several converging trends and some well-intentioned efforts to boost more people into home ownership. In the 1990s the federal government slackened regulation of financial services. Lenders began marketing high-interest-rate loans to people who don't qualify for regular loans. Those buyers are more likely to default."
"Some neighborhoods see so many foreclosures that even owners who keep up payments can't sell their houses for what they paid for them. They're trapped. In recent years the city of Charlotte allowed, even encouraged, development of dozens of neighborhoods filled only with low-cost 'starter houses.' Those areas are most vulnerable to foreclosures and lowered values. The Observer found a stunning 54 neighborhoods had high concentrations of foreclosures on at least one street between 2003 and early 2005. The highest on any street, 69 percent, was on Hope Valley Lane in northeast Charlotte's Northridge Village."
"In
neighborhoods with large numbers of foreclosures, it can be hard to resell your home for a profit. Average prices actually declined in 39 of 73 neighborhoods with high foreclosure rates, most of them low-priced. A study of property values in Chicago found each foreclosed home within a city block decreased the value of a home by 1 percent."
"Foreclosed homes often are resold at steep discounts, undermining the market for neighboring homes. Such homes also can stay vacant for months or years before resale, creating eyesores that may deter potential buyers of neighboring properties. 'If there are multiple foreclosures on a street, people know it,' said Dan Immergluck, a professor at Georgia Tech University who co-authored the Chicago study."
"The best advice for home shoppers? Make sure you know it, too."
'Nobody Showed Up'
The
Boston Globe has this report on the fall-out from the housing bubble. "Foreclosure filings last year in Massachusetts were up 34 percent through November, compared to the prior year. Experts say the trend is a fallout from the housing boom of the past decade, in which people took out high-risk mortgages, such as interest-only and no-down-payment loans, in order to get into expensive homes."
"'You could lose a job, go through a divorce, a medical emergency in the family, or the market could dip,' said Jeremy Shapiro. The total number of foreclosure filings through November was nearly 10,500, Shapiro said. Essex County had a 49 percent increase over the same period in 2004. Suffolk, Plymouth, Bristol, and Barnstable counties all had increases of more than 42 percent."
"Lenders in recent years have become more willing to give loans without down payments, and to borrowers with damaged credit. 'People are getting loans based not on their ability to pay,' said Virginia Pratt, a financial adviser who works for a Boston nonprofit. 'Lenders and brokers are making money. There are a lot of fees built into the loan.'"
"Mary Nunziato peeked out the window to see who arrived to take her house away from her family. The auctioneer placed folders full of papers on the hood of his car and waited for bidders. 'I was nervous. I was upset,' said Nunziato, who quit her job as a school custodian more than a year ago after being diagnosed with leukemia and diabetes."
"Turns out the auctioneer wouldn't need to shout over the dogs barking inside or the planes overhead approaching Logan Airport. 'Nobody showed up,' Nunziato said."
"That was last month. Another auction is scheduled Jan. 31. The Nunziatos say they owe about $30,000 in back payments and late fees after they stopped making their $2,170 monthly payment in June."
"Despite her predicament, Nunziato said she's hoping to get another home loan to buy a cheaper house in Fitchburg. She said she's been given a preliminary OK for a loan at 8 percent, a subprime rate."
Defaults Hit First Time Homeowners In Mass.
The
Boston Herald has this report on Massachusetts. "Foreclosure filings in Massachusetts last year were up 34 percent through November, compared to the prior year, data show, and the net effect of the spike is that many first-time homeowners are hearing the words 'gimme your shelter.'"
"The number of foreclosure filings through November was nearly 10,500. Essex County had a 49 percent increase over the same period in 2004, while Suffolk, Plymouth, Bristol and Barnstable counties all had increases of more than 42 percent."
"In the last six months, the site states, Boston had 483 foreclosures. One reason is that home prices in Massachusetts have appreciated 67 percent in the past five years, according to the OFHEO. October’s median selling price for a single-family home in the state was $349,000, up from about $210,000 in 2000."
"Communities with the greatest foreclosure spikes include Reading, at 250 percent; Burlington, at 200 percent; Seekonk, at 163 percent, and Newburyport at 163 percent. Of towns with at least 50 foreclosures in 2004, the top hikes were in Lawrence, with 113 percent, and Lynn, with 70 percent."
"Paying On Time A Challenge' In Metro Atlanta
Another report
from Georgia. "Gwinnett properties in foreclosure jumped to 570 in January, the highest total in four years. The number of foreclosures is based on legal notices submitted to the Gwinnett Daily Post this month, but paying the mortgage on time is apparently a challenge for property owners in numerous metro Atlanta counties, not only those in Gwinnett."
"A 13-county metro region, including Cobb, Fulton, Rockdale, DeKalb and Gwinnett, totaled 15,253 foreclosures in the year 2000. Last year, there were 37,605 foreclosures, a nearly 147 percent increase. The problem extends nationwide."
"'Over the past seven years, the numbers have slowly been going down nationally, with the exception of a few hot spots, but now every area is increasing, and there are economic factors are behind it: higher interest rates, fuel prices, unemployment,' said Brad Geisen. One of those hot spots in recent years has been Atlanta, where the number of foreclosures has gone up ever year since 2000."
"Geisen’s latest assessment may have been foreshadowed by the Mortgage Bankers Association. In a December survey, the Association said fewer property owners were delinquent on their mortgage payments and fewer loans were in foreclosure.
But, even though 96 percent of homeowners paid their mortgages on time, 'it is likely that rising short-term rates will impact some borrowers with adjustable rates,' Doug Duncan, MBA’s chief economist and senior vice president, said in the survey.
Duncan also said 'natural gas prices have roughly doubled from where they were this time last year. That and the higher costs of home heating oil are driving up home heating bills this winter and will likely strain the ability of some borrowers to make their mortgage payments.'"
Texas Foreclosures 'On The Move'
Here is a
press release on 2005 foreclosures in Texas. "Foreclosures in Texas are once again on the move. For the month of December 2005, a total of 2,997 new foreclosures were reported in Texas. By comparison, at the end of November 2005, 2,350 homes were on the sales block due to foreclosures."
"For all of 2005, the total number of foreclosed properties in Texas stood at 11,458, up from the 9,928 foreclosed homes recorded at year-end 2004."
"'December's higher US
foreclosure rates were almost exactly the same foreclosure rates reported in October, which means that the two months with the highest numbers of foreclosures were both in the fourth quarter of 2005,' said James J. Saccacio, CEO of RealtyTrac. 'These rising numbers to finish off the year may indicate that economic factors such as higher interest rates are making it harder for some homeowners stay current on their mortgage payments.'"
"Texas documented the highest foreclosure rate of any state, with a 61 percent increase in new foreclosures in December. The state reported 12,753 properties entering some stage of foreclosure, one new foreclosure for every 631 households and the most new foreclosures reported by any state. Texas accounted for more than 15 percent of the nation's new foreclosures, RealtyTrac reported."
"Increasing foreclosures in Ohio and Indiana kept foreclosure rates in those states among the nation's five highest for the second month in a row. Ohio reported 6,767 properties entering some stage of foreclosure, a 36 percent increase and one new foreclosure for every 707 households. Indiana reported 3,387 properties entering some stage of foreclosure, a 21 percent increase and one new foreclosure for every 746 households."
"Foreclosures jumped 30 percent in Nevada and 22 percent in Utah, and foreclosure rates in those states also ranked among five highest nationwide. California reported 7,674 properties entering some stage of foreclosure, a 27 percent increase and the third most new foreclosures reported by any state in December."
American Consumer 'Stressed'
A
flurry of reports are out on personal finances. "The rush of indebted consumers to file bankruptcy before a tough new law took effect pushed personal filings for 2005 to their highest annual level on record, more than 2 million, according to new data."
"Significant increases in consumer bankruptcy filings occurred in every region. It tallied 2,043,535 new filings last year, up 31.6 percent from 1,552,967 in 2004, meaning that one in every 53 households filed bankruptcy petitions."
"Filings in Ohio jumped 51.7 percent in 2005 to 135,142, making it the second-highest state in volume, the data showed. California was the highest, with 164,856, a 35.9 percent increase."
"Straitened
circumstances are becoming more familiar to those in their 20s and 30s as they try to get a foothold on the American Dream. Student loans, depressed wages, rising healthcare costs, and soaring housing prices are creating new economic realities. 'We never imagined we'd be peddling our wares for food money at the age of 30,' one says. A combination of graduate school tuition, meager salaries, unemployment, a career change, and the cost of setting up housekeeping had drained their modest resources."
"The proportion of
consumers behind on their credit card bills remained near record-high levels in the July-September period as high gasoline prices and rising interest rates continued to put stress on personal budgets. The American Bankers Associated reported Tuesday that the percentage of credit card accounts 30 or more days past due dipped slightly to 4.74 percent in the July-September quarter after having hit an all-time high of 4.81 percent in the spring."
"Even with the slight decline, consumer card delinquencies in the late summer and early fall were at the third-highest level on record, prompting concerns about more problems to come. 'Signs of financial stress still are present,' said James Chessen, ABA's chief economist."
Default Inventories Head Back Up, Georgia Update
A
Press Release has some data on foreclosure inventories. "According to data released today, 91,905 foreclosed residential properties were available for sale in the United States during December, an increase of 12.7 percent from November. The total number of new foreclosures listed for sale in December, 24,124, increased 7.7 percent from the prior month."
"These increases mark the highest month-to-month increase of both new and total foreclosures since March 2005. The South region of the U.S., Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee and Texas, led the country with a 17.4 increase in new foreclosures from November to December and a nine percent increase in new foreclosures. The Midwest region showed the second highest percentage increases, followed by the Northeast and West regions."
"'The relative stability of U.S. foreclosure inventory ended in December," said Brad Geisen. 'If factors such as waning investor confidence in the housing market, high interest rates and a weakening sellers market continue, it is very likely that foreclosure inventory will remain high in the early months of 2006. Regardless of what happens in the first quarter, the current foreclosure inventory represents a very strong buyers market for investors and individuals.'"
And
from Georgia. "More people have been getting priced out of the housing market in Georgia, according to a government report issued Tuesday. To keep the flow of first-time buyers into homes, lenders have become increasingly creative about mortgage programs. Some of the offerings are a little too creative, DC Aiken said, if they offer an unreasonably low payment that can balloon beyond the buyer's ability to make payments. He described the so-called option ARM as 'a dangerous program.'"
"Georgia's total
foreclosedresidential properties reached 5,930 at the end of 2005, according to data released Wednesday. Georgia had 1,748 new foreclosures in December, compared with 1,584 new foreclosed residential properties in November."
'No Dip In Sight' For Denver Area Defaults
MSNBC
reports that defaults jumped in the Denver area. "Real estate foreclosures jumped 17 percent across seven metro Denver counties, plus Elbert and Weld counties, in 2005. At least 16,047 real estate foreclosures were filed last year in the nine Front Range counties, up from 13,685 in 2004. Some counties, such as Adams, reported more than a 30 percent increase."
"The foreclosure tally for 2005 is the second-highest in Colorado's history, behind only 1988, when 17,122 foreclosures were filed, according to county public trustees. Statewide, Colorado registered 2,687 foreclosures in November, placing it second in the nation behind only Georgia, which had 4,416 foreclosures during the month."
"'A lot of times it's a single event that leads to foreclosure, a job loss, an illness, a divorce,, said Kim McGrigg, a spokeswoman for the Denver office of the Consumer Credit Counseling Service. Increasingly, however, other factors are squeezing homeowners, from rising mortgage interest rates to higher energy prices, health care costs and credit card payments."
"'There is a percentage of people who come in with overwhelming credit card debt who simply say they overspent,' McGrigg said."
"Job losses often correlate with high foreclosure rates, economists say. Denver and Adams counties reported the highest unemployment rates in the metro region at 5.6 percent and 5.5 percent, respectively. Denver County's foreclosures jumped to 3,699 from 3,351 last year, and Adams County's jumped to 3,281 from 2,499."
"Some county public trustees say the foreclosure tally could have been higher. Arapahoe County could have added another 200 foreclosures to its 3,600 year-end tally, but clerks simply weren't able to process all the files that poured in last month. 'Those left on the shelf roll over into 2006,' said Mary Wenke, Arapahoe County public trustee. 'It's not going down, that's for sure. We've been told by attorneys representing the major lenders that they don't see a dip in sight at all.'"
"From 2003 to 2004, there was a 31 percent increase in foreclosures, and the two previous years were higher than that, at 44 percent and 55 percent, public trustees said."
GSE Foreclosure Search Engines
Many readers sent in emails about buying
Fannie Mae REO properties. Plug in some zip codes and please post what you find in your neck of the woods!
And here is
Freddie Mac's search engine. I'll put these up in the links section of this blog.
'Home Equity Fountain Of Youth Drying Up'
The
San Francisco Chronicle looks at US savings rates and debt. "When the Commerce Department recently tallied up consumer finances for November, it found that Americans shelled out more money than they took in. It was the seventh such month of red ink during 2005. In November the savings rate was a negative 0.2 percent."
"Given how much red ink households racked up in the first 11 months of last year, Kevin Lansing said the nation's personal savings rate could well be negative for all of 2005."
"That, he added, would be 'the first such occurrence since the Great Depression.'"
"But other economists, including current members of the Federal Reserve, say the falling savings rate isn't so alarming. They argue that the declining savings rate has been offset by another factor, rising home prices. 'A lot of the psychology of savings is that you're prepared for an emergency,' said economist Tim Kane with the Heritage Foundation in Washington. 'And if your house is worth 10 percent more, then you feel you're prepared.'"
"In a sense, the American home has become the proverbial cake that consumers can have and eat as well, optimists say. 'Consumers want to borrow, tapping the equity they have in their homes,' said Kieth Leggett, the American Bankers Association economist. 'We have really figured out a way of banking to free up illiquid assets so they have greater liquidity.'"
"But many economists say housing prices will, at best, flatten out, breaking the cycle of refinancing that has allowed consumers to borrow and spend. 'I'm afraid the home equity fountain of youth is going to dry up,' said Scott Anderson, an economist with Wells Fargo. He said Freddie Mac, the giant mortgage reseller, projects that consumers will withdraw a record $200 billion in cash-out financings in 2005, a figure that is expected to fall to $110 billion in 2006 as mortgage rates rise."
"Oakland homeowner Sue McCullough, 46, has experienced the pitfalls of going from two incomes down to one. They owned a fourplex, living in one unit and renting out the others. A string of bad breaks eventually caused them to lose their property in St. Louis and file for bankruptcy in 1997."
GSE's 'Take What They Can Get' On Defaults
Myrtle Beach
Online has this report on foreclosed mortgages. "U.S. government-chartered mortgage companies Fannie Mae and Freddie Mac have foreclosed on at least 46 homes worth $4 million in the Laurel Woods neighborhood since 2002. In 29 of the foreclosures, Fannie Mae and Freddie Mac resold the homes within months for less than half of their mortgage value. Six of the homes were resold for between 50 percent and 60 percent of their mortgage value, and the remaining 11 homes haven't sold."
"The track record in Laurel Woods is a microcosm of the dangers Fannie Mae and Freddie Mac face when they rely on largely unregulated finance companies to ensure that borrowers are qualified for, and can repay, the loans they get."
"'Fannie Mae and Freddie Mac don't have a lot of control over the people out there approving these loans,' said Tom Maeser. 'All it takes is a few real creative and less-than-honorable mortgage people to get them in trouble.'"
"The Fannie Mae and Freddie Mac foreclosures, which took place between 2002 and 2005, were of mortgages those companies purchased from finance companies and banks that made high-risk, known as subprime, loans to Laurel Woods buyers."
"'We believe there's a housing bubble,' David Tice told Barron's. 'This whole phenomenon of lending with essentially nothing down to a lot of consumers scares the jeebers out of us. Fannie has been instrumental in helping that along. It's just a matter of when, not if, this real-estate bubble pops to what degree, and Fannie will be one of the companies most hurt.,"
"Fannie Mae and Freddie Mac sold the foreclosed homes in Laurel Woods for much less than their defaulted loan amounts, settling for as little as 18.2 percent of the amount owed in one case."
"In some cases, Fannie Mae and Freddie Mac sold the foreclosed homes to investors who then resold the properties for a profit. The home at 8476 Knollwood Drive, for example, was sold to a manufactured-home dealership that more than doubled its money when the home was resold three months later for $125,000. In another case, a land developer bought a home out of foreclosure from Fannie Mae for $47,500 in October 2003. The developer then sold the home a month later for $92,700, a 95.2 percent profit."
"'The homes are basically a write-off situation for Fannie Mae and Freddie Mac,' Maeser said. 'They sell it for what they can get and take their licks.'"
"Maeser said it could take years for Laurel Woods to rebound. 'They may never get their money back,' Maeser said, referring to residents and investors hoping to sell their Laurel Woods homes. 'It may be that they'll have to look at how much of a loss they're willing to take just to get out of the situation.'"
Dominion 'Tosses Salt On Wounds' In Ohio
The
Columbus Dispatch reports on the ongoing Dominion Homes disaster. "Some homeowners in the embattled Galloway Ridge neighborhood say it’s as if their new management company is tossing salt on gaping wounds. Foreclosures and bankruptcies have ravaged the Far West Side subdivision of about 650 houses built by Dominion Homes. Property values have plummeted, leaving most residents owing more on their mortgages than their houses are worth."
"Yet a company Dominion hired Nov. 1 to run the Galloway Ridge Homeowners Association, is cracking down on privacy fences, landscaping, unpaid dues and other conditions spelled out in deed restrictions."
"The management company’s president, David Dye, made no apologies for the hard-line approach. 'You chose to buy a house in a subdivision with deed restrictions,' Dye told a crowd of about 200 Galloway Ridge residents at a sometimes emotionally charged meeting at Westland High School last night. 'Our job is to read the deeds..and enforce them.'"
"Dominion can’t let go, Dye told the crowd. The Dublinbased builder still has about 150 lots to sell and needs to protect its investment. 'They want it to look good,' Dye said."
"Dye deflected questions about the neighborhood’s most pressing problems: declining property values and foreclosures. Those, he said, aren’t 'homeowner-association issues.'"
"In the past three years, 110 Galloway Ridge homeowners have faced foreclosure, bankruptcy or both. Property values have dropped below what residents paid for houses."
"The subdivision’s woes were featured in a four-part Dispatch series in September that detailed Ohio’s lax oversight of the mortgage-lending industry and Dominion’s high default rate. Its troubles now are at the heart of an investigation of Dominion Homes by the Ohio attorney general’s office."
Rate Increases Worry Colorado Trustee
The
Grand Junction Sentinel has this update on defaults in that part of Colorado. "The number of foreclosures in Mesa County dropped 2 percent in 2005 from the year before, according to the Mesa County public trustee. Foreclosures totaled 384 last year, down slightly from 392 in 2004, Public Trustee Barbara Brewer said."
"Brewer said she is concerned that as mortgage interest rates increase, more homeowners may face foreclosure. In recent years, many homeowners have financed their homes with interest-only loans or adjustable-rate mortgages, both of which can leave overextended borrowers vulnerable to interest-rate increases."
"Higher interest rates mean borrowers who are pinched by rising payments on their current mortgages might not be able to find a less-expensive way to refinance their loans. 'I worry they’re not going to be able to make their payments,' Brewer said. 'I’m afraid we may see more foreclosures in the next couple of years.'"
"The number of foreclosures in Mesa County in recent years is a far cry from the levels reached during the years immediately after the oil-shale bust. Foreclosures peaked near 1,600 in 1985, then steadily declined to a low of 43 in 1994, according to Brewer."
And the Pueblo
Chieftan has this. "A housing market analyst contends housing values are overpriced all over the country, Pueblo included. Sticker price does not play the biggest role in the rankings, the analysts note. Income levels, population density, interest rates and other considerations are the main factors, they say."
"Grand Junction is tops in the state at 31 percent over valued, even though its $183,632 price tag is well below Denver, Boulder ($305,655) and Colorado Springs prices."
Consumer Credit Tightens On Many Levels
The
Orlando Sentinel looks at consumer credit trends. "Many of the banks that issue credit cards are raising their minimum required monthly payments this month, in some cases doubling them, as a result of pressure from federal regulators worried about U.S. consumers' deepening debt and its potential effect on the financial system. Though some banks began phasing in higher minimum payments as long as two years ago, as much as 50 percent of the industry just made the change."
"'To some people, that may not seem like much, but when you don't have a lot, an extra $100 a month is going to put a big strain' on your budget, said Michelle Smith, 39, a mother of three in St. Cloud who is wrestling with about $3,500 in debt on three cards. 'I try to pay a little more than the minimum, but I don't ever pay double. I use the money for things like car repairs, gas, groceries and other household needs.'"
"It's not clear how many Americans with credit-card debt pay only the minimum monthly payment. Estimates range from as low as 4 percent, according to the American Bankers Association, to as high as 45 percent, according to a survey by the Cambridge Consumer Credit Index. About 167 million Americans have at least one credit card, according to the Nilson Report, an industry newsletter. By that measure, 6 million to 75 million cardholders are paying the required minimum or close to it."
"For Wayne Watt of Apopka, a low minimum payment was a godsend for almost a year as he struggled with $30,000 in credit-card debt, accumulated from medical, automobile and other expenses. Watt eventually paid off the credit cards with a refinanced home mortgage, but 'it definitely helped me get through some hard times,' he said. 'And now they're changing it to make the minimum payments higher? That's going to hurt a lot of people.'"
"Still, banks need to be flexible and provide proper notification so their most cash-strapped customers have time to adapt, said Travis Plunkett, legislative director for the Consumer Federation of America. 'Tens of millions of Americans are going to be affected by these higher payments,' he said. 'And unless the banks do it the right way, they are going to see a lot of defaults and many forced into bankruptcy.'"
"The widespread adoption of higher minimum payment comes on the heels of a new bankruptcy law that tightened the screws on many debtors last fall. The comptroller of the currency's chief concern is that, if such debt continues to spiral upward, credit-card customers would eventually start defaulting on their debt in larger numbers, undermining financial institutions nationwide."
Carolinas Experience Big Jump In Foreclosures
The
Carolinas Newswire has the latest on foreclosures in those states. "Foreclosure rates in both Carolinas continued to climb in 2005 despite solid economic conditions and historically low interest rates, which also have begun to move higher. Christian Werner says there is a lack of restraint among lenders and lack of discipline among mortgagees that is causing the problem."
"'We've been seeing double digit month-to-month increases in foreclosure in North and South Carolina virtually all year. In November, homes in some stage of foreclosure increased in NC by 23 percent and in SC by 75 percent from the previous month,' says Werner. 'I think there is some greed on the part of lenders and some recklessness on the part of homebuyers affecting the foreclosure rate. And it is not just at the low end of the market that we are seeing foreclosures.'"
"Werner says he often loses business because he won't qualify potential homebuyers for more home than they can realistically afford. Unfortunately, he says, there are plenty of lenders who will qualify them for the maximum loan amount possible. Additionally, foreclosure is an easy way to get out of a mortgage with virtually no effect on the mortgagee's ability to buy another home."
"'If we don't begin to see some restraint from the industry, and some discipline on the part of mortgage holders, a legislative solution to this increasing problem may be the answer,' he says."
A Short Lesson On The Foreclosure Process
The
Herald Today has this from a foreclosure author. "Although the basic foreclosure procedures remain virtually unchanged, thanks mostly to the Internet it has become much easier today to find and profitably acquire foreclosed properties."
"While recently reading an excellent new book on this topic..by Steve Berges, I learned approximately one out of every 22 houses is in the foreclosure process. As I drove down the street yesterday, when I counted 22 houses, I asked myself, 'Which of these owners is behind in their mortgage payments?'"
"The start of a foreclosure occurs when a borrower fails to make their monthly mortgage payments for one or two months. After 45 days or so, if the borrower doesn't respond to the lender's polite default letters, most lenders begin the foreclosure process."
"Here are the three basic foreclosure steps, and the bargain-buying opportunities: Lender records a lis pendens lawsuit or notice of default. The official foreclosure process begins when a home loan lender records either a lis pendens lawsuit (which means litigation is pending) or a notice a default. The lis pendens lawsuit is used if a mortgage is involved, whereas a notice of default is recorded when the lender's security instrument is a deed of trust. The lis pendens lawsuit often results in a judicial sale of the property. But a notice of default can result in a nonjudicial trustee's sale."
"However, the borrower usually has three to six months to cure their loan default and reinstate it before the property goes to a foreclosure auction. Texas has the shortest reinstatement period, which can be as fast as 21 days."
"This reinstatement period creates the first opportunity for a home buyer or an investor to contact the defaulting owner to see if the property can be purchased, often at a bargain price for a quick sale. Because time is of the essence, foreclosure buyers during this reinstatement period usually purchase 'subject to' all existing liens, such as a second mortgage, mechanics' lien, property tax lien, judgment lien, and IRS income tax lien. A purchase during this 'pre-foreclosure period' enables the buyer to obtain title insurance so there are no title surprises."
"Pros and cons of buying at the foreclosure auction. Frequently, a property is 'over-encumbered' with total mortgages and liens that exceed the property's market value. In that situation, it doesn't pay to buy during the pre-foreclosure reinstatement period because the defaulting borrower has little or no equity."
"In that situation, if the borrower doesn't cure their default, the best time to buy may be at the foreclosure auction. The big advantage is most junior liens recorded after the obligation which is being foreclosed are wiped out by the judicial or nonjudicial foreclosure sale. However, unpaid property taxes and IRS income tax liens are not wiped out."
"Disadvantages of buying at the foreclosure auction include (a) no opportunity to inspect the property interior, (b) competition from other bidders, and (c) cash (or cashier's checks) are required. Sorry, your Visa, MasterCard or American Express card are not welcome."
"As frequently happens, no bidders show up at the foreclosure sale. The title then goes to the foreclosing lender. Institutional lenders then call it REO (real estate owned) property, which they usually want to unload quickly, sometimes at a bargain price to mitigate the lender's loss."
"My personal technique for buying REO property from lenders is to immediately send a FedEx overnight letter after the foreclosure auction to the lender's president with an offer to buy the foreclosed property. I enclose a substantial deposit check to show my sincerity. Although my FedEx letter has never reached the lender's president (as far as I am aware), it does get referred to the REO or other appropriate department."
"If the house is in especially bad condition, I include a remark such as, 'Have you seen this property lately?' or 'I hope the city inspectors haven't condemned the property yet.' When possible, I include a photo showing how bad the house looks. The foreclosing lender's usually prompt response is to accept my purchase offer, counteroffer, or reject it. But some lenders insist on marking the foreclosure up to full market value and listing it for sale with a local real estate broker, thus incurring a sales commission."
"Of course, not every house or condominium that enters the foreclosure process goes to a lender's foreclosure sale. Especially in the last few years, thanks to a robust real estate market in most communities. However, as mortgage interest rates slowly rise, and fewer buyers can qualify for new mortgages, the number of home foreclosures is expected to rise in 2006. But good times or bad, there are always foreclosures. Somebody profits from every foreclosure sale, it might as well be you."
